Mumble: The Carbon Tax is boring

My impression is that Mumble is a little partisan (I seem to recall him mentioning that himself), but does a reasonable job of analysis even so. I think he’s right that most Australians have moved on from the carbon tax, so whilst it increased prices (of course it did, that’s the point of a carbon tax – if it doesn’t increase prices then it’s hardly going to reduce emissions) that is mostly over now. People are still scared when they open power bills and see what they’re paying, but there is some traction in the argument that most of the increase isn’t carbon tax related.

The area where the Coalition can still make some ground is with the move to a floating price for carbon credits on 1st July 2015. The current EU carbon price is ridiculously low at about $4 per ton. Whereas the current Australian carbon price is around $24 per ton. The Australian scheme allows EU credits to be used in Australia, so logically the price will trend towards the EU price.

The problem is that the government compensated households through taxation and benefit changes based on the price of $24, so that most households were slightly better off (ignore the thought that if most households are slightly better off, and all taxation has deadweight costs, that the overall process must be net negative for the economy). If the carbon price falls to around $5-$10, then the government will be compensating households at around $24, and selling the carbon permits at around $5-$10, for a loss of $15 on each permit. That’s going to create a large budget hole. This is something I’d be banging on about if I was Tony Abbott – the size of this gap.

So whilst I agree with Mumble that just the fact of the carbon tax isn’t interesting any more, there is still room for the Coalition to make ground, and for their policy to remain sensible.

In other news on Mumble, the poll numbers for Gillard are poor. The polls are a bit up and down at the moment, which says to me that sentiment is soft, but I guess we’ll see as the year progresses.